Have We Bailed Out Enough?

ist2_6278830-wheel-barrel-full-of-money  With bailout after bailout when does it end?  It seems as if it is only going to get worse before it is going to get better.  With unemployment at 1982 levels, home values falling at record levels, banks failing, companies failing and little credit available.  This mess has gotten out of control.  It is time to get back to basics and stop this bailout nonsense as we all know it is political payoffs.  The lavish corporate parties and bonuses clearly point this out. 


  The mortgage industry is going to get the stop light on it for the foreseeable future so let’s start here.  Please bear with me as I point out a few things that seem to be lost in the shuffle. 


Home Prices


  Home prices are set by market demand.  If a Realtor thinks they can get more money for a home than the last sell then they will list the sells price of a home higher than the past sell.  So ask yourself, who sets the price of a home?




  Currently all appraisers are licensed by the State that they work in.  Without this license any appraiser is out of business.  These licenses are in place so that an appraiser can be stopped from doing appraisals if there are complaints filed against them or if they are not in compliance with the laws that govern the appraisers license. 


  The job of an appraiser is to find like properties and create a report showing these properties and their sells prices.  The use of an independent party to determine the value of a property is in everyone’s best interest. 




  The job of an Agent is to get the best deal possible for their client.  So do you think they are recommending that you sell your property for less that it is worth?  It is time to stop kidding ourselves, Realtors will always ask for as much as possible. 


Mortgage Brokers / Lenders


  The job of a mortgage broker is to find a loan program for a buyer that has already agreed upon a sales price.  There is no way for the average person to keep up with the ever changing loan programs.  This is where a specialist works in your favor.  Unlike a bank a Broker has hundreds of loan programs available to them with many sets of guidelines.  I bank has, in most cases, has a single set of guidelines and limited programs.  These programs may or may not be the best fit for your scenario.  Do you think the bank is going to tell you that you can get a better deal somewhere else? 


  Brokers are like a grocery store.  The banks come in and stock our shelves with loan programs and you come in and buy a loan “off the shelve.”  I continue to ask how in the world did mortgage brokers single handily bring down the mortgage industry.  It was not possible.




  It is the job of the banks to underwrite every loan that was done.  These underwriters are employees of the banks.  Fannie Mae and Freddie Mac set the guidelines and the banks make sure that these people meet the minimum qualifications.  The Bank’s employees look over every Broker loan submission in detail and they continue to blame Brokers for their down fall.  The worst part of these is the media has never set the record straight and continue to blame brokers.


  Banks need to stop buying other banks with bailout money.  This is a joke.  If AIG is to big to go down then why are we allowing the banks to get bigger?  No bank is to big to go down.  There would be no Wal-Mart, Target, Home Depot or Lowes here today if White Front, Gemco, Treasury, Builder’s Emporium, Nationals, Oles and countless other business did not get top heavy. 


  Today Wells Fargo completed its intergration of Wachovia/Vertice.  This bank was in trouble and Wells Fargo bought it.    BofA bought Countrywide, Chase bought WaMu & Bear Stearns and Citi bought Interfirst.  Why would anyone buy a loser?  Or did they?  Taking over these so called bad banks has allowed the big banks to get TARP money at .25% and lend it out on average 5.25%.  That is a net profit of 5% return on investment with little risk.  Can anyone tell me where I can get this kind of return on investment with the same risk?      


Wall Street


  This is a real mess.  The Stock Brokers are the people that are making out with all of the transactions.  It does not matter to them if you loose or make money as they get paid with every transaction.  I think it is time to let the chips fall where they may here.  The market will recover quicker if we unplug the life support. 




  All of this bailout money flying out at an unbelievable rate.  What good has it done so far?  Enough!  The Feds want to protect us from our spending habits and limit how much Mortgage Brokers can make.  HELLOOOooo, there is already a national limit – section 32, did they forget?  The Feds & the Media clearly has no clue.  This pointing the finger like a hot potato is playground stuff and needs to stop.  How about our leaders pay their taxes and get down to the business of running the country.  I am having trouble with our leaders and their inability to lead their own lives.  And these people are leading us.  Is this the blind leading the blind? 


Mortgage Rates


  4% home mortgage rates are great but the people that can qualify for these rates are people that really did not need them.  Yes we all want to save money and yes these people should be able to get these loans too but, the guidelines are way to tight today.  4% home mortgage rates will only help very few people.  We need big picture thinking here. 




  The Media has a role to play in the Mortgage Meltdown too.  Why is it every night the media only likes to focus on the negative.  There are companies that are hiring people as the Mortgage Industry is currently expanding.  Yes the big banks are cutting employees but the smaller banks are expanding.  Where is the Media and why are they not talking about this? 


  The Media likes to talk about people that are unemployed in terms of numbers and tell us that it is as bad as 1982.  This is correct in terms of numbers but today there are 60 million more people in the work force.  So ask yourself, is the percentage of people out of work the same? 


So what is the answer?


  The Country has dealt with recession several times in the past that I can think of.  We even had a complete collapse of one of our banking systems, the former Savings and Loans.  We only seem to want to look at the S&L issue when we what to hang something negative around someone.  So what did our leaders of the day do to get the mortgage industry moving in 1982?  I can tell you this; they did not give billions of dollars to the Savings and Loans.  They let the Savings and Loans fail just as any business should that is miss managed. 


  The Feds made large tax credits available to people that purchased homes in the early 80’s.  Needless to say the foreclosures where purchased quickly and the numbers fell to manageable numbers.  There will always be foreclosures for many reasons but this number needs to be 2% or less.  Once these foreclosures are reduced to reasonable numbers then home prices will begin to rise again.  When home values begin to raise then the credit markets will begin to move again as the banks will not have to hold so much cash in reserves. 


  If the Feds offer the tax credits and revise the Fannie/Freddie guidelines then the healing can begin.  This throwing money after bad money is like a person with a gambling problem.  It is time to cut our losses and get down to business.  History has the answer of what to do, why are we acting like teenagers with all of the answers and not listening.  It starts with the top man so President Oboma what are you going to do?  Pick up a book that deals with US economics of 1982 and read about what was done. 


History has clearly repeated itself just as it did in the late 70’s and unfortunately I fear it will happen again.         


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